UK growth downgraded

The
CBI has downgraded its forecast for UK economic growth in the first quarter of
2011.

The
employers group expects growth of 0.2 per cent, down from 0.3 per cent, as
public sector job losses and higher-than-expected inflation slow the economic
recovery.

The
CBI also expects the Bank of England to start raising interest rates from the
spring of next year.

However,
it does not see the UK falling back into recession, and predicts second quarter
2011 growth of 0.4 per cent.

However,
the CBI warned that the VAT rise from 4 January and higher energy bills would
hit consumer spending.

It
said consumers also remained cautious because of fears over unemployment.

The
business organisation predicts that after 0.4 per cent growth in the second
quarter it expects 0.5 per cent for each of the third and fourth quarters,
giving a 2 per cent annual growth rate for the year.

The
CBI also made its first estimate for gross domestic product growth in 2012,
which it expects to be 2.4 per cent. This is slower than usual for the third
year of a recovery from recession, the body said.

Regarding
interest rates, the CBI expects that starting from the spring, they will rise
“gently” from the current record low of 0.5 per cent, increasing
until mid-2012.

It
says that the Bank of England will need to increase rates to tackle inflation,
which it says will remain high due to both higher energy bills and the VAT rise
from 17.5 per cent to 20 per cent.

The
CBI says CPI (consumer prices index) inflation will “significantly exceed”
the Bank’s 2 per cent target for a second year in 2011, before returning to
about 2 per cent in 2012.

The
most recent official figures showed that CPI inflation rose to 3.3 per cent in
November, a six-month high.

The
UK economy grew 0.8 per cent between July and September, according to the most
recent official figures.

This
was a slowdown from the 1.2 per cent expansion recorded from April to June.

0
0

NO COMMENTS